Sundaram Finance Limited's (NSE:SUNDARMFIN) last week's 7.1% decline must have disappointed retail investors who have a significant stake

Key Insights

• Sundaram Finance's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 35% ownership
• 26% of Sundaram Finance is held by insiders

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To get a sense of who is truly in control of Sundaram Finance Limited (NSE:SUNDARMFIN), it is important to understand the ownership structure of the business. With 49% stake, retail investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 26% shares weren’t spared from last week’s ₹39b market cap drop, retail investors as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about Sundaram Finance.

Check out our latest analysis for Sundaram Finance

What Does The Institutional Ownership Tell Us About Sundaram Finance?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Sundaram Finance does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Sundaram Finance's earnings history below. Of course, the future is what really matters.

Sundaram Finance is not owned by hedge funds. Axis Asset Management Company Limited is currently the largest shareholder, with 2.7% of shares outstanding. For context, the second largest shareholder holds about 2.6% of the shares outstanding, followed by an ownership of 2.6% by the third-largest shareholder.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sundaram Finance

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Sundaram Finance Limited. It has a market capitalization of just ₹508b, and insiders have ₹131b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sundaram Finance. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 10%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Sundaram Finance better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Sundaram Finance (at least 1 which is significant) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.